- AUD / USD continues to push lower during US trading hours.
- Rising US Treasury yields provide a boost to the USD.
- The focus shifts to the FOMC policy announcements and the dot plot.
The pair AUD/USD remains under moderate pressure in the second half of the day amid widespread USD strength ahead of the FOMC event. At time of writing, the pair was down 0.55% on the day at 0.7701.
US Treasury Yields Extend Rally
In the absence of major fundamental drivers, US Treasury yields continue to affect the market valuation of the dollar. Currently, the benchmark 10-year Treasury yield, which hit its highest level in nearly 13 months at 1,687%, is up 3.05% to 1,669% and the USD index is rising 0.13% to 91.99 .
Meanwhile, risk aversion, reflected by a 0.5% drop in the S&P 500 index, is making it difficult for the Australian dollar to rebound.
Later in the session, the FOMC will publish its Monetary Policy Statement along with updated Economic Projections. Market participants will be looking for clues as to the possible timing of the taper and a hawk signal is likely to send AUD / USD lower before the weekend.
On the other hand, if the median forecast from Fed policymakers shows that rates are expected to remain near zero through 2023, based on December projections, the dollar could lose its strength and pave the way for a rally in AUD / USD.
In the early trading hours of the Asian session on Thursday, market participants will closely follow the Australian employment report. Market consensus points to a 30,000 increase in job change in February and a stronger than expected impression could help the AUD find demand.
Technical levels
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